Tariffs Hit Canada as Inflation Rises Again
A Mixed Week for Canada: Strong Spending, Higher Inflation, and New Tariffs
Hope you had a great weekend.
Last week felt like one of those weeks where the market kept giving investors mixed signals.
Canada’s retail sales came in stronger than expected.
Inflation moved higher again, mainly because of gasoline and travel costs.
The TSX bounced on Friday, helped by mining stocks, but still ended the week slightly lower.
And then came the biggest story: Canada-U.S. trade talks broke down, and new U.S. tariffs on some Canadian goods moved ahead over the weekend.
So here’s the big question: Is Canada’s economy still showing strength, or are inflation and tariffs starting to create bigger risks under the surface?
Let’s break down what moved the market last week, and why it matters for Canadian investors 👇🏾.
📈 Market Pulse: TSX Bounces Friday, But Slips for the Week
🇨🇦 TSX Composite: (36,620.23 | -0.3% for the week) Canada’s main stock index ended Friday at 36,620.23, up 0.7% on the day.
The market ended the week better than it looked earlier, but the week was still choppy. The biggest support on Friday came from materials. Materials rose 2.9% as gold prices rallied. This helped mining stocks, which are a big part of Canada’s market. Financials also rose 0.3% ahead of Canadian bank earnings, while energy gained 0.5%.
But the bigger weekly story was uncertainty. Investors were watching rising bond yields, tariff talks, oil prices, and whether the TSX could keep pushing higher after its recent record run.
💡 Simple takeaway:
The TSX bounced on Friday, but still had a slightly negative week. Mining stocks helped, but trade uncertainty and rising bond yields kept investors cautious. Also, the loonie got support from stronger inflation data early in the week, but tariff pressure could become a new headwind.
🇨🇦 Canada Inflation: Prices Picked Up Again
Canada’s July inflation report was one of the biggest economic updates last week.
Inflation rose to 3.0% year over year in July, up from 2.8% in June.
That puts inflation at the top end of the Bank of Canada’s target range.
Gasoline prices were up 25.7% year over year, helped by global oil pressure and Middle East tension.
Transportation costs also rose 7.8%, while Travel tours rose 15.2% year over year, and Air Transportation rose 12.0% (partly due to the World Cup).
🛒 Food Prices: There was some good news, as Grocery inflationslowed to 3.1% in July, down from 3.9% in June. That is progress… but grocery inflation has now been higher than overall inflation for 18 straight months. So even though the grocery number improved, many households may still feel pressure when they go to the store.
For everyday Canadians, this is why inflation can feel confusing. Overall inflation may be close to 3%, but certain parts of life can feel much more expensive depending on what you spend money on.
Gas, Flights, Travel, Groceries, Rent, Insurance. These categories do not all move the same way.
💡 Simple takeaway:
Inflation moved higher again, mainly because of gasoline and travel costs. Grocery inflation cooled, but food prices are still rising faster than overall inflation. Retail sales also showed Canadians were still spending in June (rising 0.6%), but early July (fallen 0.8%) data suggests consumers may be starting to pull back. So the big question is whether that spending strength continued into the summer.
🇺🇸 U.S. Markets: Stocks Rebound Friday, But End the Week Lower
U.S. stocks bounced on Friday, but still finished the week lower.
For the week:
S&P 500: down 1.43%
Nasdaq: down 2.05%
Dow: down 0.85%
The main issue was rising bond yields. When bond yields rise, borrowing money becomes more expensive. That can hurt stocks because investors start to question whether future profits are worth as much today.
It especially hurts growth stocks, technology stocks, and AI-related names because those companies are often valued based on big future expectations. That showed up clearly on Tuesday, when the PHLX Semiconductor Index fell 5% as investors pulled back from chip stocks that had already rallied hard on AI demand.
📝 The simple lesson: AI is still a major long-term story, but when yields rise, investors become less willing to pay high prices for profits that may take years to fully show up.
⛽️ Oil was also a concern: Brent crude rose 6.39% for the week, while U.S. crude rose 5.66%, as Middle East tension kept pressure on energy markets. Higher oil can raise inflation fears because it can affect gas, shipping, and business costs.
💡 Simple takeaway:
U.S. markets were under pressure because higher bond yields made investors more cautious. AI stocks are still important, but they are no longer getting a free pass.
💵 Trade and Tariffs: The Deadline Turned Into a Real Problem
The biggest Canadian story was trade.
Earlier in the week, it looked like Canada and the U.S. might avoid the worst-case scenario. Trump announced a three-day pause on new 50% tariffs and said a deal was close.
But by the end of the week, talks broke down.
Over the weekend, the U.S. moved ahead with 50% tariffs on about $20 billion worth of Canadian goods. That is just over 5% of Canada’s exports to the U.S., so it is not the whole Canadian economy.
But for the industries affected, it can still be painful.
The tariffs can hit goods like wine, furniture, dairy products, cement, clothing, fishing rods, and hockey equipment. Canada has now said it will respond with dollar-for-dollar tariffs startingSeptember 8, targeting U.S. goods such as steel, dairy, appliances, agricultural equipment, pulp and paper, and electronics.
💡 Simple takeaway: The tariff deadline is no longer just something to watch. It has turned into a real trade fight. The direct impact may be limited to certain sectors, but the bigger risk is what it does to business confidence, jobs, prices, and Canada-U.S. trade relations.
🗓️ Looking Ahead: Canada GDP, Bank Earnings, Nvidia, and Jackson Hole
Even though this newsletter is a recap, the next week has a few important things investors should keep on their radar.
🇨🇦 Canada’s GDP report comes out Friday. That will show whether the economy kept growing in June and how strong the second quarter really was.
🏦 Canadian banks also report earnings next week, which is very important because banks are a HUGE part of the TSX. Bank earnings also give us clues about: Consumer debt, Loan losses, Mortgage pressure, Business borrowing, Credit card health. a.k.a. the overall strength of the Canadian economy.
🇺🇸 In the U.S., investors will be watching Nvidia earnings and the Fed’s Jackson Hole symposium, where the Fed chair may give clues about inflation, interest rates, and how the central bank is thinking about the economy.
💡 Simple takeaway: Next week could be important. Canada gets GDP and bank earnings, while the U.S. gets Nvidia earnings and more Fed commentary. That means investors will get fresh clues about the economy, AI, and interest rates.
📝 Final Thought: My Finance Femster Take
Last week was a reminder that the economy can look “fine” in one area and stressful in another. Retail sales improved, the TSX is still near high levels, and some parts of Canada’s economy are holding up. But inflation is back at 3%, tariffs are now real, and markets are getting more sensitive to interest rates, oil, and AI expectations.
These headlines can eventually touch your real life. Tariffs can affect prices and jobs. Inflation can affect groceries, gas, travel, rent, and interest rates. Market swings can affect your TFSA, RRSP, workplace pension, or long-term investing confidence. This is why financial literacy matters: not so you can panic, but so you can understand what is happening and make better decisions with your money.
And that’s where having the right support can make a real difference.
If you’ve been trying to manage your money on your own but feel unsure about where to start, I offer a free intro call to see if my financial guidance program is the right fit for you.
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Keep learning, keep building, and keep making your money decisions with purpose.
Cheers 💫
Your Wealth Coach,
Finance Femster